More woes for hedge fund adviser

4 Aug

Author: Angelique Arde

Publications: iOL

Date Published: 03 August 2014

The Ombud for Financial Services Providers has handed down another ruling – the fifth so far – against financial adviser Michal Calitz, who advised a number of his clients to invest in the Relative Value Arbitrage Fund (RVAF), which turned out to be a scam.

Calitz was paid R8.4 million in share profits from the RVAF before it collapsed in July 2012, the month the master-mind of the scheme, Herman Pretorius, committed suicide. The RVAF collected an estimated R2.2 billion from about 3 000 investors.

In the latest ruling, ombud Noluntu Bam ordered Calitz to repay Garvitte Herman Lombard R700 000.

According to the ruling, Calitz alleged that he did not introduce Lombard to the RVAF. He claimed that another of his clients who had invested in the scheme had. He also claimed that he told Lombard that the RVAF was an unregulated hedge fund, and that the fund manager, Abante Capital, was registered with the Financial Services Board. He contested that Lombard was satisfied with the risk and that the funds invested constituted about 10 percent of Lombard’s portfolio. The RVAF investment was to diversify the client’s portfolio.

In the latest ruling, ombud Noluntu Bam ordered Calitz to repay Garvitte Herman Lombard R700 000.

According to the ruling, Calitz alleged that he did not introduce Lombard to the RVAF. He claimed that another of his clients who had invested in the scheme had. He also claimed that he told Lombard that the RVAF was an unregulated hedge fund, and that the fund manager, Abante Capital, was registered with the Financial Services Board. He contested that Lombard was satisfied with the risk and that the funds invested constituted about 10 percent of Lombard’s portfolio. The RVAF investment was to diversify the client’s portfolio.

But in her determination, Bam refers to her first ruling against Calitz and the “key issues”: his failure to understand the entity and the risks to which he was exposing his clients, whose funds were transferred directly into the RVAF “without even the protection afforded by a nominee account”.

“Quite simply, no adviser would have recommended this product as a suitable component of any investment portfolio had they exercised the required due skill, care and diligence,” Bam says.

Lombard relied on Calitz’s advice, and Calitz failed to act in accordance with the Financial Advisory and Intermediary Services Act.

Calitz is the owner of Impact Financial Consultants, an authorised financial services provider in Bellville, Western Cape. He is a member of the Financial Planning Institute and is an accredited Certified Financial Planner.

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